Under current rules, religious instruction can only be delivered in public schools during the lunch break, or before or after school.

Mr Smith said that change had "killed the program".

"Let's be honest, children don't want to sit in the classroom learning about religion at lunchtime. They want to go outside and run around and play with their friends," Mr Smith said.

He said all major religions would be invited to be part of its plan, and the Coalition would work with schools to find "appropriate" activities for students whose parents chose for them not to participate.

But Education Minister James Merlino said the previous arrangement had taken "precious" learning time away from students who opted out of religious instruction.

"Common sense tells you, and I think most parents would agree, that the situation where you've got a program where 20 per cent of kids participate [in special religious instruction] during curriculum time, during teaching time, and 80 per cent of kids are not learning anything — they're reading, they're drawing, they're playing — I think that's inappropriate," Mr Merlino told ABC Radio Melbourne.

"We want our kids to learn about different faith traditions, and that is part of the curriculum being taught by teachers. What we took out, and put into extracurricular time, is special religious instruction, and I think that strikes the right balance."

'This is about parent choice'

The Australian Education Union's (AEU) Victorian branch president, Meredith Peace, said state school teachers were opposed to the return of the program.

"[The Opposition] say they want to review the curriculum because it is too crowded, and yet they want schools to go back to a system where they take up part of that curriculum, where kids learn about a specific religion," Ms Peace said.

"The AEU supports the teaching of religions and the impact of those religions on our history, and their influence on our society, that's an important thing for kids to understand in the world we live in.

"But that is not about teaching kids specific religions and I think if parents want that for their children then they have access to either religious schools, or they can attend a faith-based organisation on weekends or in their own time.

"Our public schools are not the place for teaching about a specific religion, and we certainly don't support that."

The Australian Christian Lobby's Victorian director, Dan Flynn, said the Coalition policy marked "a return to the sensible centre".

"This is about parent choice, it's optional, and if it's a good fit for the school community then there's every reason why a school should offer it," Mr Flynn said.

He said preventing religious instruction during class time risked denying students "a window to important world views".

"For example, in Christianity, students will learn about the Good Samaritan, they'll learn to treat others as they would like to be treated themselves — you know, kindness, turning the other cheek, basic tenets of Christianity … which are uncontentious."

Mr Flynn suggested a non-religious ethics class could be taught to students who opt out of religious instruction so that they did not miss out on educational hours.